In The Event Of Default, Foreclosure Hold Back

Problems Are Here

Whichever the problem, you haven’t enough money to go round and you begin to pay late. In the end, you just can’t hold it any longer and you cut the line. Default is here. What next? Before we start thinking about foreclosure or repossession, there are some alternatives that depend mainly on what you do with what you have. It will make all the difference in the world.

The Alternatives

If you have missed a payment and have the means to make up for it in the near future, say a month or two, see your lender immediately and explain the situation. Although it’ll cost you a few bucks on punitive interest, it’s not so bad. You’ll get by. The problem comes when you can’t continue paying.

Private Lenders

They are in the business of lending money, not administrating real estate. So, the target is to sell the property as soon as possible. You may be able to keep it if the total debt you have does not exceed 40% of your income, but it will mean talking to your lender and negotiating a solution. Lenders want the loan to be in force, not to repossess. Remember your credit rating can be harmed very much with the process of foreclosure.

A Good Explanation

Try to explain honestly and as clearly as possible, why he should not execute repossession, meaning, why you have defaulted and why you think you will be able to recommence payments. One solution could be a short term repayment plan. This means that you recommence payments and those that were left out are refinanced and spread out over a short term and added to your normal payment.

Forbearance

This is an act in writing signed by the lender, by which he refrains from taking legal action and accepts a short term payment in order to avoid repossession. It is the legal document that gives way to the emergency payment plan and can be done if the borrower shows a strong desire to keep the property and shows the means with which to pay. Also there is a formal application in which your past credit history is evaluated.

Refinancing

Even having missed payments, there is a possibility to refinance. This is done to lower the interest rate, lengthen the payment term, change from fixed rate to adjustable or vice versa or all changes together.

If All Else Fails

Before foreclosure and depending on whether the property has enough equity, you are allowed to sell and pay off the mortgage before the stain falls on your credit report and affects your ratings. This will be possible if the appraised value is enough to repay and the property is in good condition for a sale within 90 to 120 days.

On some occasions, the borrower will be allowed to sell at a lower price than needed to repay the mortgage if he is having serious financial hardships or if he will not receive any cash from the operation.

Deed-In-Lieu or DIL

This is the final alternative. The borrower can not sell or doesn’t want to sell or shows no interest in selling. So he issues a Deed-in-lieu which is a voluntary conveyance of the title in exchange for the cancellation of all the debt.

So, you see, there are instances before losing the property. Keeping it will depend largely on your attitude.

Mary Wise, a professional consultant at Badcreditloanservices.com with twenty years in the financial field, prevents consumers from falling into the hands of fraudulent lenders. In her website you will find more useful tips and interesting financial articles on this and many other related topics.

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